Saturday, January 19, 2013

Jamie Galbraith on the debt limit crisis

Or I should say on why the debt-limit is a manufactured crisis. Also, great to see how much journalists do not understand the basics of macroeconomics. They really push back on the 'need' to cut entitlements.

Nope it is more fear of full employment as Jamie Galbraith calls it. See this post http://nakedkeynesianism.blogspot.com/2012/05/fed-up-with-full-empoyment-target.html. Also, inflation in the US is mostly about supply side shocks and wage resistance, and since there is no wage resistance since the 1970s there is no real inflation.

Galbraith's calm is admirable. What is frustrating that's on display from these news personalities is a pathological need to believe in non-problems, and to cling to them intensely when told they are non-problems.

Think about how this show would have gone in, say, 1835. The news personalities' minds would be untroubled by the bane of "entitlements," the bane of an ascendant China, the bane of public involvement in health care threatening to squelch all "innovation" from "entrepreneurs" (notice how ideologically charged all this language is). But they would still have been nonplussed if Galbraith gave them a sanguine assessment. Instead, their concerns would have been:

-"Poor people are having too many children!!! Malthusian doom awaits!"-"Poor people are lazy and overpaid due to the poor laws!!!"-"Poor people's terrible morals threaten our national product!!!"-"The proposed limitation of work time to 10 hours will extinguish profit!!!!"-"The Corn Laws are stifling industry and capital accumulation!!!"-"The tendency of the rate of profit to fall means doom for our nation!!!!"-"The abolition of slavery in the West Indies has ruined industrious sugar producers!!!!"-"The prodigality of luxury consumers is costing our businessmen precious investment money and benefiting the Frogs!!!"

Why the need to devote an apparently endogenous supply of spleen to "problems" that aren't real, when there are so many real problems to address? What in human psychology, social norms, or existing institutions explains this propensity?